Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
As I mentioned yesterday, we had a reversal in the latter portion of the day just as we saw on Wednesday, but the pattern was more powerful on Thursday. This is leading to a ‘risk on’ Friday to close on Q1, but we’ll see – as always – how they close ’em. Thus far in 2012, when in doubt, it always falls in the bulls favor.
Looking back at the year I was curious to recall how many days in a rows the bears had on their side before an up trend resumed. With one exception (4 days) the rule has been 3. However, two of those three day selloffs have occurred the past 2 weeks.
Further, Investors Business Daily has for the first time since mid December placed the market with the designation “uptrend under pressure”, as we now have had five distribution days in the past five weeks or so. Five or six distribution days is usually a warning that large investors are increasingly selling shares even as the indexes can hold up, and are definitely a thing to keep an eye on. On the flip side (always trying to see both sides of an issue) three of those days happened in a cluster before the early March selloff, so if the market can ‘hang in there’ and churn for two weeks or so, they will drop off – this of course assumes no new ones replace them!
As for China, the past two days have been very rough and the Shanghai index had fallen out of its lower Bollinger Band for the second session in a row, this time by a wide margin. Overnight there has been a decent rebound of half a percent which should help risk appetities at least for a day. Many of the global growth stocks (and energy stocks) were clobbered the past few sessions in the U.S., so could be poised for a ‘reversion to mean’ trade back up. [chart below does not reflect Friday’s move]
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